1. Field of the Invention
The present invention relates generally to using performance history of customers to define and quantify business performance both strong and weak, and in terms of past and forward growth potential. The invention is a mechanism by which to cause disparate business departments and personnel to form higher performance alignment.
2. Description of the Related Art
Sales analysis repeatedly shows that companies experience significant revenue leakage due to sales erosion from their existing customer base. Wanting growth, businesses put pressure on the sales department to pursue new customers. As reps focus outward, current customers receive insufficient attention while at the same time they are extensively courted by competitive companies who themselves are pursuing new customers. As a result, existing-customer relationships soften, along with sales and growth. The rate of erosion in dollar terms typically far surpasses the rate new customer sales are added. Thus, the standard and dominant practice to spur growth paradoxically diminishes it, causing the cycle to be repeated wherein the sales group is pressured further, while customer-support budgets are tightened due to reduced revenues.
The root cause for revenue leakage traces to legacy accounting-oriented measurement practices. “Modern” double-ledger accounting practices originated in the early 1300s AD. Generally Accepted Accounting Principles (GAAP) include four primary measurements: 1) Revenue, 2) Unit counts, 3) Cost of Goods sold and other costs (including Sales, General and Administrative (SG&A)), and Profit.
Standard measurements have served businesses well for centuries and will remain a stalwart of business. However, the formation of the Internet at the end of the 20th Century brought with it a sudden transfer of information to the buying consumer. Buyers today have the ability to quickly access product features, pricing, product reviews and a host of purchase and delivery options, all from their computer and mobile devices.
Businesses have taken account of the transfer of information to the consumer. Vision and mission statements today routinely include language related to “customer intimacy”, “customer driven,” or “customer focused.” Business intent, however, has not met with equal follow-through; not for lack of want, but for lack of effective, efficient measurement capability.
Whereas revenue and costs are finite measures, customer perceptions are ever-changing and perceptive in nature. Business information systems are accounting oriented. They deal in finite units such as dollars and unit quantities. Such systems and those who design them have been either 1) not adept at quantifying “gray” areas such as perceptions, or 2) so highly adept the resulting statistician- and PhD-formed measurement equations are beyond the ability of the common worker to easily comprehend and apply in real world instances.
Ultimately businesses practices form around what is readily measurable. The ability to readily account for sales, margin, costs and units keeps such measures primary in the corporate mix. Equally simple customer trending and satisfaction measures remain largely absent.
Simplicity and repeatability of measurement are primary requirements within the corporate environment. Sales, units, costs and profit have remained rooted as business measures precisely because they are repeatable measures and understandable across the organization, from the white collar executive to the sales clerk to the shipping dock. To be effective, measures of customer satisfaction must be formed and calculated within a framework that is readily reproducible and easily understood. While trained analysts, researchers and statisticians may be able to form a point-in-time measurement of customer satisfaction, standard statistical devices such as regression analyses are far beyond the comprehension and applicability of the average customer-facing worker. Therefore, while customer measures can be obtained, for them to be actionable (valuable) simplicity is a fundamental requirement to enable action at the outer edges of the organization—sales, service and support functions—where customer relationships are formed and nurtured.
Lacking an effective, simple method to measure trended customer satisfaction, businesses maintain emphasis on their legacy accounting methods (GAAP) as dominant business measures. As a result, generally accepted sales marketing practices are also retained. The basis for conventional sales and marketing practices trace back to the late 1950s when models such as the “4Ps” and the “Hierarchy of Effects” and the “Marketing Mix” were first presented. The mid 20th century was the Golden Age of Marketing with the post war boom creating high consumer demand and readily available resource to accommodate both the manufacturing and purchase. The product- and manufacturing-based business models became deeply embedded and remain entrenched in today's business practices and business education. But, as described herein, today's markets are no longer product and manufacturing oriented. Today's economy is driven by an information & service economy and customers.
The invention injects a new measurement into the traditional GAAP by taking component measures of old, and blending them in such a way as to simply define customer perceptions and predict future performance.